Rents on residential property in Australia are likely to soar as much as 11% in 2010 as landlords look to pass on increasing costs to tenants as a result of rising interest rates and land taxes according to a new report by Australian Property Monitors (APM).

Australia saw rental growth of 2% in 2009, the lowest increase since 2002 as job losses and economic uncertainty kept many landlords from raising rents.

Matthew Bell, APM Economist, said: “There simply aren’t enough new properties being built for investment purposes to meet the increased demand, and it is clear that in 2009 rents were generally kept in a holding pattern as landlords and the market waited to see the end of the global financial crisis,”

The brighter economic outlook and an ongoing lack of supply in the housing market will see rents increase between 8-11% in Perth and Brisbane, whose property markets are expected to see the largest increases. APM expect Sydney will see rents up by 4-5% and in Melbourne by 5-7%.

The report also stated that new build property was unable to keep up with the rampant growth in population, with not enough new properties being built to meet demand.

Australia’s eight capital cities had an average rental residential vacancy rate of 2.1% in the third quarter of 2009, according to the Real Estate Institute of Australia, compared with a record 7.8% apartment vacancy rate in the U.S.